On Tuesday, I discussed in Daily Profit how cooperation between the
I don’t think it’s any coincidence that last night, Chinese officials came out and said they were long-term investors in China, just as Treasury Secretary Geithner finished a round of meetings in China.
This is exactly the type of cooperation I was talking about.
I will not be surprised if we see a rally for Chinese stocks at this point. Yesterday’s show of support is further evidence that
Oil prices are also on the rise this morning. Crude futures are hitting above $73 a barrel.
Commerzbank analysts were quoted as saying there was "a temporary change of mood on the oil market (which) suggests that prices will rise further in the near term."
I continue to chuckle when I read analysts who simply don’t seem to see the long-term fundamentals of oil. There is a hard cap on global production potential. It’s only demand that can change. And we’ve already seen supply and demand come within a few million barrels a day of each other back in 2007. It’s only a matter of time before it does.
And I would further argue that relatively lower oil prices actually speed up the time when supply and demand reach parity.
When oil prices fall, it makes exploration less profitable. So oil companies delay or even cancel plans to bring new supply to market. That means new supply will necessarily be slower to market when demand (and prices) do rise.
But that’s only part of the issue. Oil prices fall for one reason – expectations of slower economic growth. When growth slows, governments are less likely to fund alternative energy programs to speed the adoption of wind, solar and even natural gas adoption.
These days, given the debt level of governments around the world, countries simply can’t afford to rebalance their economies and build out infrastructure that integrates alternative energy sources.
So we are left still wholly dependent on oil, and even more vulnerable to spikes in price.
While it’s always possible to have stock-specific problems, like what’s happened to BP (NYSE:BP), oil stocks remain one of my top long-term recommendations.
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